The Influence Of Local Government Tax Competition On Capital Flow

In the market economy,competition is ubiquitous and the local government in our country must compete in carrying out taxation.At the time of the reform and opening up,in the prevailing economic background and political environment,our country mainly adopted the mode of "income and expenses unified" to carry out taxation.However,the local government,on behalf of the central government,did not carry out taxation work on its own initiative.To promote the local economic development,the tax competition does not exist.Since the reform and opening up,China has continuously deepened the market reforms and started to implement the system of fiscal decentralization in different government structures.As a result,our local governments have enjoyed relative independence and autonomy in the implementation of taxation and also have certain discretion,Gradually become independent economic interests.In order to achieve the goal of maximizing their own interests,local governments began to intensify the competition for tax resources.Capital plays an important role in the economic development of a region.In order to reduce financial pressure and improve political performance,local governments adopt various tax preferential policies to implement investment promotion so as to promote the development of the local economy.However,academia has some degree of disagreement about the impact of tax competition on capital flows.Most scholars agree that tax competition has a positive effect on attracting business investment.They think that government tax competition can reduce the tax burden on enterprises and increase the return on capital of enterprises.However,some scholars hold the opposite opinion that the vicious tax Competition has reduced the government's fiscal revenue,resulting in lower government capacity for public service construction and widening regional disparities,but rather suppressed investment.Regulating the tax competition of local governments helps to coordinate the balanced development of the regional economy.Therefore,starting from the tax competition,this paper explores its effect on the inter-provincial capital flows in China.This paper studies the impact of tax competition on capital flows in China as a whole and in East,West and East China through theoretical and empirical research methods.This article has five parts.The first part is the introduction,which mainly focuses on the research background,significance,basic research framework,research methods,research contents and innovations.The second part is literature review,which shows that the tax competition affects capital flows from both domestic and foreign perspectives The third part first introduces this article's basic theory,including conceptual explanation of the term,the means of government competition,the form of capital flows and the tax adjustment of capital flows theory.Afterwards,it focuses on the mathematical derivation of a model of capital tax competition and analyzes the impact mechanism of tax competition on capital flows.Finally,it shows that tax competition affects the performance of capital flows.The fourth part is the econometric model.Firstly,The existence of tax competition between the test to verify that the local government does exist tax competition based on the use of panel data model and from both national and regional levels of tax revenue on the impact of capital flows are analyzed;the fifth part This article summarizes the research results,and puts forward the improvement measures and policy recommendations according to the actual development of our country.